SOURCE: Small Business Research Board

March 04, 2009 12:26 ET

Majority of Small Business Owners Use Residence as Collateral; Latest Small Business Research Board Study Finds a Decrease in Loan Limits

Third of a Series

BUFFALO GROVE, IL--(Marketwire - March 4, 2009) - The majority of small business owners in the U.S. that use their residence for collateral are getting mixed responses from lenders when requesting higher credit limits, according to a nationwide Small Business Research Board (SBRB) study.

The SBRB study, co-sponsored by Business Today Magazine, reports that more than 500 owners and managers participated in the SBRB/Business Today "Small Business Lending Relationship and Loan Requirements Study."

Of those business owners indicating that they use their home as collateral, 50.4% said their lenders had amended their borrowing levels, while 49.6% said lenders have not changed the credit level.

Where loan levels were adjusted, 45% received higher credit ceilings, a decrease of 20 points from the previously mentioned lending study. The credit level for 22% was raised by up to 10%, and in 23% of the cases the credit limit was increased by more than 10%.

Conversely, in 11% of the instances, the credit limit was reduced by at least 10%, while in 45% of the instances the credit limit was reduced by more than 10%.

This is the third in a series of four SBRB/Business Today reports examining small business lending relationships and loan needs. The first report indicated that the relationships small businesses have with their principal lenders appear to be good and even getting better.

The second report focused on overall 2008 loan needs and anticipated 2009 credit requirements. The report found that 25% said they will increase the dollar value of their loan requests or raise the limit on their line of credit in 2009. This is an increase of one point from the 26% of small businesses that increased their loans or lines of credit in 2008. 58% reported that their lines of credit will remain unchanged.

In addition, the majority of participants (49%) in the U.S. poll said they felt that access to credit was unchanged from the previous six months, while 12% said it was "easier." This is a decrease of nearly 15 points from the previous lending study conducted in the fourth quarter of 2007. Of the remaining respondents, 35% said they described access to credit as "more difficult," an increase of 21 points, and 5.5% indicated that access to credit was "impossible."

The fourth and final report will detail cost and compliance pressures. Future reports will include findings in seven distinct industries -- manufacturing, construction and contracting, retail, food and beverage, distribution and wholesaling, transportation and automotive.

Business Today Magazine is dedicated to serving the information needs of owners and managers of small businesses. The primary goals of the quarterly publication, based in Buffalo Grove, Ill., are to inform and educate readers by providing timely, useful information that will help readers both contend with the daily demands of running their businesses as well as provide insight on achieving long-term growth. Business Today workshops are also conducted throughout the U.S. to provide educational resources for entrepreneurs and their managers. Their Web site can be found at www.ipabusinesstodaymagazine.com.

The Small Business Research Board ascertains and reports attitudes on a wide variety of national and international issues that impact small businesses. These studies benefit owners and managers and also provide opportunities for third parties to gain real time insight into the attitudes of small businesses.

The latest information about the Small Business Research Board can be found at www.ipasbrb.net.

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